Wednesday, May 6, 2015

US Treasury INTENTION SPSA, FHFA for Fannie Mae = BOMBSHELL

http://www.fasab.gov/pdffiles/dec08mins.pdf

Final Meeting Minutes on December 17-18, 2008

Mr. Reid then noted that at September 30 it was probably too early for the GSE’s to develop estimates. As such, they should be in a better position by December 31st to take matters into consideration such as defaults and non-payments which are the underlying securities and that Treasury will need to react to that appropriately. Mr. Lingebach responded by stating that the September 30 GSE figures were not audited but it did appear to Treasury that the GSE’s were trying to scrub their figures. He further noted that what triggered the payment to Freddie was the write-off of certain deferred tax assets.

Mr. Dacey went on to explain that at the end of the day, the preferred stocks (subject to valuation write-downs) will be on the federal government’s balance sheet. At this point, Mr. Steinberg asked whether or not it was possible for the Federal government to financially benefit from these transactions. Mr. Lingebach stated yes, but noted only to the extent that the GSE’s do well going forward.

Treasury NOTES: YES conservatorship will be profitable to the Government!

Mr. Farrell inquired that if Treasury recorded this as an expense, did the GSE’s as a result book this as income/revenue or possibly as an accounts receivable. Mr. Lingebach replied that the GSE’s booked these transactions directly to equity. Mr. Farrell then asked that if at the end of the fourth quarter the GSE’s show assets to be greater than liabilities; would they be required to pay the federal government back? Mr. Lingebach replied in the negative stating that there is no repayment provision.

TREASURY NOTES: NO, the GSE's do not record TDA as a POSITIVE in accounting! But the Treasury knows they are there!!

After Treasury ‘s explanation, Mr. Patton then asked to review the language on page 3 of the referenced position paper specific to the journal entry language. Mr. Lingebach confirmed that the language should have been revised to read that the debit would be to an expense and not to a deferred asset. For clarification purposes, Mr. Dacey noted that the asset belongs to the general fund and the expense is incurred by Treasury. Mr. Jackson then added that this is because appropriated funds were being used and that in
essence, the transaction nets out to a zero-sum noting that the liability is basically “repaying” the appropriation.

Treasury Explains the Loaned money costs TAXPAYERS NOTHING!

Mr. Geiger then went on to say that one of the difficulties the firm had in doing the valuation was that there were some off balance sheet transactions that complicated the analysis and it was not as clear-cut as Treasury had hoped for. Also, the high-end of the range, $200 B was not an accounting estimate but was a figure developed from a public policy perspective to give confidence to the markets.

Treasury NOTES: $200 B was not an accounting estimate, but like an insurance to the market!

Mr. Dacey reviewed that in theory, the September 30 balance sheets reflected GSE fair values as well as write-downs of their other assets; i.e. due to impairment. As a result, and again in theory, if the GSE’s remained solvent going forward, then the $13.8 B would be the extent of the liability. However, Mr. Dacey did point out that the conversations held with the GSE’s confirmed that if the market declines further, there would be further losses to absorb. The problem is that one cannot project with any degree of certainty how much further, if any, the market could decline.

NOTE: The DOJ is fighting in court asserting the Treasury knew nothing of the DTA's. THIS is NOT true, this document proves this!

Mr. Werfel clarified this by stating that a review of the accounting literature leads to the answer that generally 51 percent ownership would require consolidation with the exception that if the ownership is deemed temporary, then Treasury would not have to consolidate the GSE’s. Mr. Werfel further noted that the warrants which are analogous to stock options do not constitute control. Also, if the warrants were exercised with the intention of selling them off, there would be no requirement to consolidate. However, Mr. Farrell noted that regardless of the exercise of the warrants, it seems that the government has at least the appearance of control as it can replace management and dictate Board appointments, approve certain transactions, etc. This led Mr. Farrell to ask about the concept of control.

NOTE: Warrants were to give the illusion of control, NOT ownership, as this would put the $5.5 trillion on the Governments books!

Mr. Jackson asked if the common stock was now worthless from an Internal Revenue Service point of view and Mr. Werfel stated that the shares are now down below a dollar and were trading close to about $6.00 at the time of the conservatorships' announcement. OMB estimated that the exercise price for the warrants was approximately $640,000.00.
Mr. Jackson made two additional points: (1) He agreed with Mr. Steinberg that concept statement 2 never contemplated events which are now taking place. As such, FASAB may need to go back and look at some of its statements to see if changes are needed and (2) the role of government is at question. That is, the government is taking possession not for ownership sake but rather, in order to protect the general interest and welfare of the people. The sole purpose in this case is to bring stability to the markets and not become owners. Somewhere, whether in FASAB standards or its concept statements, the Board may need to reflect this unique role of government as protector and not proprietor.

Note: Government the role of government is in question! Is it an investor? Owner of private for profit companies?

Mr. Lingebach said that was correct and that market increases would only be shown in the disclosures. Mr. Geiger then added that we should clarify the revenue piece. The revenue received in exchange for the liquidity guarantee in this case amounted to $7 billion. This represents the standard fee that an organization would get for providing such a guarantee.

Government states $7 billion is the needed FEE for $200 billion commitment! There is The Treasury profit above the draw for SPSA! From their mouths!

He further noted that what triggered the payment to Freddie was the write-off of certain deferred tax assets.
Mr. Dacey went on to explain that at the end of the day, the preferred stocks (subject to valuation write-downs) will be on the federal government’s balance sheet. At this point, Mr. Steinberg asked whether or not it was possible for the Federal government to financially benefit from these transactions. Mr. Lingebach stated yes, but noted only to the extent that the GSE’s do well going forward.

TREASURY NOTES: YES conservatorship will be profitable to the Government!

Mr. Farrell inquired that if Treasury recorded this as an expense, did the GSE’s as a result book this as income/revenue or possibly as an accounts receivable. Mr. Lingebach replied that the GSE’s booked these transactions directly to equity. Mr. Farrell then asked that if at the end of the fourth quarter the GSE’s show assets to be greater than liabilities; would they be required to pay the federal government back? Mr. Lingebach replied in the negative stating that there is no repayment provision.

TREASURY NOTES: NO, the GSE’s do not record DTA as a POSITIVE in accounting! But the Treasury knows they are there!! if the GSE assets became greater than liabilities would they be required to pay back? NO he answers. This was known in 2008 that if the GSE's became profitable the government would not be paid back, so in 2012 a new plan was hatched to SWEEP the Market cap of each company. Proof the government not only knew the DTA was there but months before the SWEEP was enacted they did the exact same to AIG and reversed the DTA and paid off the government. The SWEEP insured that Fannie and Freddie would not be doing this since the SPSA has a provision for paying off the SPSA with CASH!! The same cash that the Sweep required to be paid to Treasury as dividend instead of payoff. The size of each payment made would have continually reduced the 10% interest the Treasury was charging to the point of paid off. No one makes a $65 billion payment on $117 billion loan and then keeps paying interest on $117 billion. The interest payment would drop by 1/2 and continue downward as payments came in to pay down the SPSA. 

After Treasury ‘s explanation, Mr. Patton then asked to review the language on page 3 of the referenced position paper specific to the journal entry language. Mr. Lingebach confirmed that the language should have been revised to read that the debit would be to an expense and not to a deferred asset. For clarification purposes, Mr. Dacey noted that the asset belongs to the general fund and the expense is incurred by Treasury. Mr. Jackson then added that this is because appropriated funds were being used and that in
essence, the transaction nets out to a zero-sum noting that the liability is basically “repaying” the appropriation.
TREASURY NOTES: The Loaned money costs TAXPAYERS NOTHING! zero-sum




No comments:

Post a Comment

leave a reply: